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India’s economy is slowing. On January 7, the National Statistics Office forecast annual gross domestic product growth of just 6.4% for the financial year ending in March. This would not only be the slowest growth in four years but below the initial projected growth rate of 6.5%-7%. Worse, much of this was driven by a slowdown in manufacturing, further stymieing India’s efforts to employ its massive population.
Is this a cyclical slowdown? A temporary blip driven by short-factors? Investment bank UBS does not think so. It has blamed factors such as slowing foreign investment.
The chief India economist at the investment bank HSBC, Pranjul Bhandari, contended that the high growth India saw till now was simply the economy rebounding after the Covid-19 pandemic. “My sense is the kind of growth numbers we are going to see in the foreseeable future are going to be on average closer to about 6.5%,” she said.
India’s incredible growth story since the early 1990s has long been celebrated. So why is there so little concern over this slowdown? This radio silence is made all the more inexplicable by the fact that India’s otherwise voluble middle class is itself a major victim of this slowdown.
In October, Suresh Narayanan, chairman and chief executive officer of Nestlé India spoke about the “shrinking” middle-class as a way to explain the poor performance of the food and beverages giant.
This is especially bad, given that India never had a very big middle class to begin with. Before the pandemic hit, the Pew Research Center, an American research think tank, estimated that 99 million Indians were middle class. This, in turn, was cut by a third by the pandemic.
By comparison, China, with a population smaller than India’s, has a middle class five times larger – and the pandemic saw almost no reduction in this number.
Even as some of India’s middle class would have bounced back after the pandemic, persistent problems such as the lack of jobs and high inflation are likely to have ensured that the group remains small relative to its population.
Until 2014, middle-class woes and the economy in general received great attention. They were part of general discourse, as is obvious from the numerous jokes about the falling value of the rupee under the Manmohan Singh government. Though the Modi government has done much worse on this parameter, there are few jokes to be heard.
Part of this lack of outrage stems from the fact that much of India’s middle class functions as a loyal vote bank for the Modi government. Even though they are hurting, they are disinclined to raise much of a stink given it would hurt their preferred party politically.
More structurally, much of this arises from the fact that more than any other section, the middle class values Hindutva as their primary political mover. As a result, the middle class is ready to take material hits in order to preserve their ideological positions.
In addition, some of the silence stems from India’s restrictive political environment, which prevents contrarian voices from coalescing – much less organising. As a result, even if discontent does exist, it does not assume political shape.
Critical in this is the role of the media that has, by and large, refrained from attacking the Modi government. Other institutions such as the judiciary have also contributed to the silence. Till 2014, for example, a belligerent judiciary often attacked the government on corruption – an issue that many Indians blame for poor material conditions. Nothing of the sort has happened under Modi. Even allegations of egregious corruption against the Adani Group, a corporation seen to be favoured by Modi, have seen the judiciary go soft.
Unlike the middle class, India’s poor are often more ready to vote on their material interests. However, they lack the power to make the economy a national talking point. Till the middle class gets involved then, India’s economic slowdown will not create outrage.
